Press Release
January 31, 2017


Senator Sonny Angara welcomed the retention of tax exemption of workers' 13th month pay and other bonuses in the revised tax reform package presented by the Department of Finance (DOF) before the Senate committee on ways and means on Tuesday.

"Nakatanggap po tayo ulit na magandang balita na hindi na kasama sa panukala ng DOF ang pagtanggal ng tax exemption ng 13th month pay at iba pang bonus ng mga manggagawang Pilipino. Again, this signifies that our government is listening to our calls and the sentiments of the people, and is open to compromise," said Angara, chairman of the ways and means committee.

Early on, the DOF has also agreed to retain the VAT exemption of senior citizens and persons with disabilities.

"We seek to build on this as we work hand-in-hand in coming up with the much-needed tax reform that will extend the most relief to our people, while balancing it with the government's ambitious vision of jumpstarting our country's economic growth," the senator said.

Pursuant to Republic Act 10653, the 13th month pay and other benefits, including productivity incentives and Christmas bonuses, not exceeding P82,000 provided to both government and private sector employees are exempted from tax.

Before RA 10653 was signed into law in February of 2015, only bonuses not exceeding P30,000 were exempted from tax.

"Tinaasan natin ang tax exemption cap ng mga bonus para naman mas malaki ang maiuuwi nilang kita para sa kanilang pamilya," added Angara, who sponsored the law.

DOF's initial proposal sought to remove this tax exemption of bonuses, while exempting from income tax those who are earning P250,000 and below a year. The P250,000 tax-exempt income was supposed to cover the P82,000 13th month pay exemption, the P50,000 personal exemption, and the P25,000 deduction for each dependent of taxpayer (maximum of four dependents).

Now, under the revised proposal, those earning up to P332,000 (P250,000 income plus P82,000 13th month pay and other bonuses) will be tax exempt.

If such tax scheme is enacted, 4.7 million or 83 percent of taxpayers will be exempted from income tax, leaving 954,000 workers paying lower income taxes. On the other hand, the "ultra rich," who comprise 0.1 percent of taxpayers, will be taxed at a higher rate of 35 percent.

At present, 1.8 million workers, who are minimum wage earners, are exempted from tax.

The first of six packages of the Duterte administration's comprehensive tax reform program seeks to lower personal income tax rates, broaden the VAT base, and adjust excise taxes of petroleum products and automobiles.

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